This is exactly what I said. The owners/c suite of the company who have been making cushy salaries, dump the company into insolvency (or more recently sell it to a fund who liquidates) rather than paying the claims themselves.
Yes, many of the claims get paid, but long after John Q. CEO has left and gotten a new cushy job elsewhere, and far too frequently long after the people who need it paid have lost everything.
Of course that’s an oversimplification, but it’s not wrong.
That’s an understatement 
Guaranty funds are insurance for insurance companies (actually a second layer of insurance for claimants, reinsurance is insurance for insurance companies). But John Q CEO never paid claims, the premiums paid the claims - sometimes directly from the insurance company and sometimes a bit indirectly via the premiums passed on to the state via the premium tax.
Yes, John Q CEO is generally overpaid and when they leave they’re not responsible for what they leave behind. But that’s true of Corporate America regardless of industry and doesn’t make insurance a racket. Without insurance the country would grind to a halt. Nothing you need would be available without insurance protecting the provider and you if something goes wrong.
I don’t understand why people single out insurance as a bad thing for reasons that are applicable to virtually every industry yet don’t make the argument that car or appliance manufacturers or homebuilders or garage owners or restaurants are all a racket. Every single industry has examples of companies going out of business and leaving customers, landlords and communities (taxing authorities) holding the bag. Except insurance where another insurance cover steps in and takes care of the customer.
Yes people do call literally all those things rackets, and many others. Pretty much any high-value sector is criticized as a racket in this late stage of capitalism.
I think you may be cherry picking to try to paint insurance in a different light. One thing that I think causes insurance to be a lightning rod (see what I did there) to these kinds of complaints is that the entire insurance industry is based around the idea that they profit by denying claims.
This cannot be ignored when doing these comparisons. Of course insurance is singled out quite a bit, it’s a particularly egregious example of a business that survives by doing the least possible for their customers.
Appliance companies make more money if their appliances don’t last very long. Ideally they die right after warranties run out and often spare parts are not available. “Oh too bad guess you should just get a new smart fridge/tv/dishwasher that we can use to send you ads.” We have all experienced this.
Car companies are trying to deny right to repair and turning things like cruise control into subscription services. Google “vin locking” if you want to rage
Home builders make shoddy houses and then dissolve the company when the lawsuits start. I bet you know someone who ran into this.
Restaurants… I mean I feel like most people don’t think of restaurants as a racket, but if they knew what sketchiness open table does to restaurants they’d probably call that a racket. Google it if you want to get mad.
Read this and see if what happened with United Healthcare makes more sense. In no way am I saying it was right, but it becomes less surprising when you look at the industry as a whole.
https://jamanetwork.com/journals/jama-health-forum/fullarticle/2816204
Actually most insurance companies make a profit only through investment returns on the money they’re holding to pay claims. Between claims and operating expenses (the combined ratio) most companies lose money to the tune of up to 20 cents on the premium dollar. But they’ve got those premium dollars for a long time in many cases so the investment returns make up for the operational loss.
You are correct that they do the least possible for their customers - that’s actually necessary for the system to work. Insurance is mostly a commodity product. There’s nothing really to distinguish a policy from State Farm vs Allstate vs Liberty, etc. People don’t want it (until they have a loss) so they need to be required to buy it. And then they almost always make the buying decision based on price. So to meet the price something has to be minimized - that’s anything not related to the contractual claim requirement. If it’s not in the contract (policy), it’s sacrificeable. Not unlike GF ignoring all the hopper requests in favor of Premium 
Do enough to keep the pitchforks and torches away but not so much more that you jeopardize the ability to provide the contracted benefits.
If people really bought based on service or were willing to pay a higher price so the company would pay some other customer (always someone else, because most of us make very infrequent claims) more than the contract required to be “nicer”, then insurance would be delivered more like high-satisfaction products & services.
Insurance works the way it does because it must based on what customers are willing to pay. It’s no different than Walmart or Dollar General or any other industry where the race to the bottom is dictated by the customer. People say they want “made in America” but only at prices where the labor is 1/10th of ours. As Pogo said, “we have met the enemy and he is us”.
I trust you know that this is bad. This should not be the goal. Also, it’s not working, see above re: United Healthcare.
Let me know when Walmart and dollar general cause 500,000 bankruptcies per year.
And thats just healthcare. Ask a Floridian how it’s going getting homeowners insurance these days.
Ask people in Georgia how auto insurance premiums have been the past few years.
Look into fire insurance out west.
It’s bad in many sectors.
They are not the same. Whataboutism and both sidesism can’t work here, insurance is a fundamentally different business model from retail.
Make that 500,001.
I already had my bridge selected.
LIked your comment, but please don’t.
Thanks! I meant to live under, not jump off…
Only sort of. The problems people highlight generally are health insurance related. Medical expenses are not suited for insurance. Insurance is a matter of spreading the risk of catastrophic events that will occur to a few members of the insured group across many members who won’t so that the costs are manageable for everyone. In the pure sense, people can choose to run the risk of catastrophic financial loss vs small payments that by definition they won’t ever get back.
Medical coverage isn’t like that. It’s designed to cover routine medical costs that virtually everyone will experience. There are catastrophic events that occur as well, but health insurance covers costs down to $1. It fundamentally violates the mathematical basis of insurance. Healthcare is not really an insurable “event”.
That’s a failure of societal prioritization. For thousands of years your health was your problem. You didn’t bankrupt yourself with medical expenses, you simply died. Society eventually evolved and determined that was neither humane nor economical in the long-term and decided we should do something about it. So instead of funding a societal need through taxes like any other vast public benefit (roads, defense, education), we turned to the private sector which responded by twisting a concept designed for something else to address the societal need. Instead of prioritizing it like public education and transport because it was fundamentally important, we let someone else take care of it in a sub-optimal way.
Unfortunately, recent events are showing that while a benevolent government responsive to the public need can handle the responsibility for healthcare in a generally satisfactory way, the potential exists for a hostile government to change all that. Hence although we’ll throw the health of millions of poor people in the trash bin because the people we elected don’t care about them, the insurance companies are not making wholesale, post-contractual changes to everyone’s coverage to benefit the CEO-kings. Sure, those kings are doing well but within the limits of what we agreed to when purchasing the contract. The big King and his court have simply decided to abrogate the public contract and take more for themselves and their courtiers.
Healthcare costs and medical bankruptcies are the fault of the people we elect to solve those problems but instead solve issues hampering the ability of the multi-billionaire class from running the score up so they come out on top in their d**k measuring parties. Because that’s a higher priority than dying and bankrupt “little people”. We elect them, we live with the consequences. It’s not like they’re hiding their priorities. They’re doing exactly what they said they would do. It’s not having the effect they said it would but reasonably intelligent and engaged people knew that and likely voted for different people. Just not enough of either the former or the latter
Yeah I hear you. It’s difficult to get apples to apples.
My rebuttal:
And
And at first glance you think “ah similar shapes then great wages are keeping pace with insurance”. Then you look at the scale and see that insurance costs have risen about 30 percent while wages have risen about 12 percent.
Look at root causes all you like. Look at tranches of the industry all you like. People are paying more and more of their income for claims that the insurance companies are always looking to avoid paying. It’s the nature of the industry.
I’m not trying to identify the causes or otherwise trying to convince anyone on any stance. You wondered why people single out insurance to criticize as an industry: that’s why. People pay a lot and we’re not stupid. Insurance companies in general try to make it hard to collect payouts. People don’t like that.
Sources:
The cost of insurance has virtually zero (causal) relationship with wages. The primary driver of insurance costs are claim costs.
Take a look at data related to claim costs - like housing, or medical or automobile parts, etc. Insurance is not as dependent on the input of human labor for its production as say a new home. Wage growth as a comparative is interesting but not highly indicative of anything meaningful except that it’s harder for people to afford it. Same as Bugattis. Used to be I could get one for only $2M. Now the latest model is $5M. My dream is even more out of reach 
Exactly. To the consumer they used to pay X dollars for insurance. Now they pay proportionally more for what to them is equivalent product: “when things go wrong insurance covers my butt”.
I’m not talking about causes of why things are the way they are I’m just answering the question of why the average person might single out insurance as a corrupt industry. Your understanding how the industry works is great, but that’s cold comfort for people who get their claims denied over what to them feels like a technicality.
Anyway.
That’s the trouble with the general financial, mathematical and insurance illiteracy in this country. It’s irresponsible of consumers because they blame the wrong people and solutions (like Medicare for all) never come rather than educate themselves.
They are not paying more for the same thing. House & auto values have climbed, repair costs for everything - homes, cars, people - have all escalated, the likelihood of loss (claims) has skyrocketed. People are paying more in real dollars for more benefit but as you said, they believe they’re just getting the same thing - like my car is covered. Not, my car that used to need a $500 door when it got bumped now needs a $1500 door and a $1000 side curtain airbag and $300/gallon no-VOC paint. Or they used to get told to go on a diet to lose weight ($0) and exercise. Now they get Ozempic at $1200/month.
Unfortunately, the result of the lack of education means the problem won’t be fixed because people don’t understand the fundamentals and have no interest in learning. It’s not any different than politics. You can’t fix problems if you can’t identify the real ones. At most, we “fix” symptoms and cause new problems as a result (see Florida’s experiment with socialized insurance called Citizens Insurance).
Cough cough.
you know, both of you are right on different levels. there’s definitely some “profiteering” going on in the insurance marketplace. but there’s also a significant lack of understanding about how insurance works in the general public.
insurance, imnsvho, would function better as a non-profit industry looking just to break even overall. but that probably isn’t realistic in our economy.
Spot on. Or at least for property insurance. Health insurance should be a public benefit since everyone needs healthcare and uncovered healthcare costs get passed on to everyone in the form of higher medical prices anyway.
The ACA tiptoed in that direction but needed to maintain the current for-profit insurance company distribution model so it could pass. We’re likely 100 years away from moving further ahead. 
Welcome back, Steve 
I am also just back from the hospital. The injury that sent me there was not fixed, plus I got covid on the way out. So I have not been active much lately, but I hope to be around more.
Blargh! Heal well.
Same, though for a much more benign reason that you. But I hope I serve as a reminder not to get your “1 week early alarm” on your calendar confused with the actual appointment. Nothing worse than doing the entire colonoscopy prep and getting to the hospital and they say “But your appointment is next week.” 
Fortunately, they were fantastic and squeezed me in that same day. 
ohh… that would have really sucked if they couldn’t have gotten you in that day and you had to do prep again in a week. colonoscopy prep is the worst. it totally justified me getting a bidet seat on my toilet.
